July 11, 2010

Latest EUR/USD Analysis - July 11 2010

I've been looking closely at the EUR/USD pair this morning and I'm coming to the conclusion that at the current price of 1.2640, this is a good shorting opportunity for both long-term and short-term traders.

(UPDATE: I didn't trade this one unfortunately as the price was already down to 1.2570 when I switched the computer on on Monday morning, but the price did fall nicely and would certainly have given me the 50-100 points that I was looking for from the first half of the position as it fell to 1.2523. The second half of the position would have been closed out at break-even as the price subsequently bounced back. Also because the price closed above the trendline, the argument for a short position is no longer valid).

From a long-term perspective you can see from the daily chart below that the price is now very close to the long-term trendline that's been in place since December last year. Therefore there is a high probability that the pair will be sold off around these levels, particularly as many indicators are now starting to suggest that this pair is in overbought territory.

Spot FX EUR_USD (11-JUL-10).png

Also from a shorter term perspective, you can see from the 1 hour chart below that the upward price channel that has been in place for the last week or so was broken on Friday afternoon. So this would point to short-term weakness, which could in turn lead to longer term weakness as well.

Spot FX EUR_USD (11-JUL-10_2).png

Of course there are no guarantees at all in forex trading and the price could easily move back up on the 1 hour chart and break through the upper line of the price channel before closing above the trendline on the daily chart. However in terms of probability I think this is a decent trading opportunity.

I myself haven't taken a position yet as I'm not really a long-term trader. Plus I'm going away on holiday soon. However if the price were to move slightly higher on Monday to around the 1.2650-1.2700 level, ie just below the lower line of the price channel on the 1 hour chart, I may just be tempted to open a short position because by placing my stop loss just above the upper line of the price channel, this would be a fairly low-risk, high probability trade.

I would then look to close half the position for 50-100 points, move my stop loss to break-even to give myself a free trade, and target a much greater move with the second half of the position.

Anyway whatever happens it should be an interesting week next week because earnings season kicks off again in the US with many of the top companies reporting their latest figures, so the markets could be fairly volatile. Let's see what happens.

(Disclaimer: This is just my own thoughts and in no way constitutes financial advice. Please do your own research before entering any positions).



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6 Comments on Latest EUR/USD Analysis - July 11 2010 »

July 13, 2010

Leah Tsang @ 8:20 pm:

Hi James,

Thanks for posting so much useful stuff on your site. I thought you always traded with the super trend and not against it. Wouldn't going short be against the trend?


July 15, 2010

James Woolley @ 1:35 pm:

Hi Leah,

Yes you're right, it was against the Supertrend but on this occasion I felt we would see a pull-back of some description.

In the end I didn't trade this set-up anyway but it would have generated a small profit.

Stacey Burke @ 9:24 pm:

Great post! Keep them coming!

July 24, 2010

Robin William @ 4:56 am:

Thanks for the valuable inputs..

July 28, 2010

John @ 12:07 am:

Great site you've got running here. Defintaly something I'll be looking at more and more.

Thanks for sharing

You can't be right all the time, but I do appreciate your approach to trading.. seeing a long term level and then waiting for the short term to turn over in favor of the long term trend is the basis of my trading style.. kudos!

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